The long-term consequences of nontraditional employment (EXCERPT), Monthly Labor Review Online, May 1998

The long-term consequences of nontraditional employment

Marianne A. Ferber and Jane Waldfogel

The October 1996 special issue of the Monthly Labor Review profiled workers in nontraditional work arrangements and analyzed their reasons for entering such employment.¹ Several articles in the same issue of the Review reported on the earnings and benefits of nonstandard workers: Steven Hipple and Jay Stewart found that contingent workers tend to earn less, and are less likely to have health insurance and pension benefits, than noncontingent workers, and that some alternative workers, such as self-employed men, earn more than traditional or standard workers, but are less likely to have health insurance and pension coverage;² and Donna Rothstein, using longitudinal data from the National Longitudinal Survey of Youth (NLSY), compared earnings on the current job with earnings on the previous job, for a select sample of workers who had been on their current job for no more than 3 years.³ Interestingly, she found that, for the typical contingent worker in her sample, the current job represented a step down from the previous job, whereas for full-time, standard workers, the current job tended to represent a step up from the previous job.
These results, as well as some from earlier research,⁴ raise a host of questions about the longer term consequences of nontraditional employment. For example, because workers engaged in such employment not only have shorter job tenures,⁵ but also are more likely to be assigned to routine jobs, to receive less training (particularly important for workers without a college education) and fewer promotions, and to be laid off,⁶ they may receive lower wages and benefits in the long run. Thus, to the extent that the problems associated with nontraditional work turn out to be more serious in the long run than in the short run, and to the extent that individuals are unaware that this is the case or have a short planning horizon, it may be that many of those who choose this type of employment voluntarily will eventually suffer serious deprivation as a result.⁷ With the exception of a handful of studies on the wage growth of part-time workers,⁸ there has been no research to date on these long-term effects. This article seeks to fill that gap.

The research to be presented uses the NLSY to investigate the long-term consequences of three types of nontraditional employment on individuals’ subsequent earnings and benefits.⁹ Building on what is already known about the contingent labor force, we investigate the following questions, which have not been addressed in the research to date: First, how does nontraditional employment (that is, one’s ever having had a nontraditional job) affect subsequent earnings and benefits? Second, are the returns to nontraditional work experience (that is, the length of time one spends in nontraditional jobs) different from the returns to traditional work experience? And third, to what extent are estimates of the effects of nontraditional employment and nontraditional work experience biased by unobserved heterogeneity among workers? The results suggest that nontraditional employment does have long-term effects on these outcomes, at least insofar as we are able to observe this in a sample of young workers followed over 15 years in the NLSY. Moreover, most of the long-term effects of nontraditional employment and nontraditional work experience persist even after controlling for potential heterogeneity bias.

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Footnotes

1 For profiles of these workers, see Anne E. Polivka, "Contingent and alternative work arrangements, defined," pp. 3–9, and "A profile of contingent workers," pp. 10–21; and Sharon R. Cohany, "Workers in alternative employment arrangements," pp. 31–45. For analyses of their reasons for entering into such arrangements, see Polivka, "Into contingent and alternative employment: by choice?" pp. 55–74; and Donna S. Rothstein, "Entry into and consequences of nonstandard work arrangements," pp. 75–82.

2 Steven Hipple and Jay Stewart, "Earnings and benefits of contingent and noncontingent workers," pp. 22–30; and Hipple and Stewart, "Earnings and benefits of workers in alternative work arrangements," pp. 46–54.

3 Rothstein, "Nonstandard work arrangements."

4 See, for example, Rebecca M. Blank, "Contingent Work in a Changing Labor Market," in Richard Freeman and Peter Gottschalk, eds., Generating Jobs (New York, Russell Sage Foundation, 1998), pp. 258–94.

5 Rothstein, "Nonstandard work arrangements."

6 See Kathleen Barker, "Changing Assumptions and Contingent Solutions: The Costs and Benefits of Women Working Full- and Part-Time," Sex Roles, January 1993, pp. 47–71; and Chris Tilly, Half a Job: Bad and Good Part-Time Jobs in a Changing Labor Market (Philadelphia, Temple University Press, 1996).

7 For instance, young people in alternative work arrangements may not be unduly concerned about their wages rising less in later years or that they are less likely to have health insurance or pension benefits. Nor will many of them look ahead to the time when they may have greater problems finding new jobs when they are older, not only because of age discrimination in hiring, but because their discontinuous employment history is likely to be viewed unfavorably by potential employers. Similarly, single heads of families often have to take nonstandard jobs when they have young children, but will find it very difficult to manage with low earnings and meager benefits when they are faced with education expenses, occasional medical emergencies, and, finally, retirement without adequate provisions for any of these eventualities.

8 Rebecca M. Blank, "Introduction," in Rebecca M. Blank, ed., Social Protection versus Economic Flexibility (Chicago, University of Chicago Press), 1994, pp. 1–19; and Jerry A. Jacobs and Zhenchao Qian, "The Duration of Employment in Part-Time Jobs," unpublished paper, University of Pennsylvania, May 1994, explored dynamic labor supply choices between part-time and full-time work. Ethel Jones and James Long, "Part-Week Work and Human Capital Investment by Married Women," Journal of Human Resources, vol. 14, no. 4, 1979, pp. 563–78; and Mary Corcoran, Greg Duncan, and Michael Ponza, "A Longitudinal Analysis of White Women’s Wages," Journal of Human Resources, winter 1983, pp. 497–520, showed that, at least in the short run, part-time work is related to lower wage growth.

9 We use the term nontraditional here to avoid confusion, because the workers we are looking at differ somewhat from the workers included in the BLS definition of nonstandard employment.

Related Monthly Labor Review articles
Contingent and alternative work arrangements. A special issue. October 1996.: Contingent and alternative work arrangements, defined.; A profile of contingent workers.; Earnings and benefits of contingent and noncontingent workers.; Workers in alternative employment arrangements.; Earnings and benefits of workers in alternative work arrangements.; Into contingent and alternative employment: by choice.; Entry into and consequences of nonstandard work arrangements.

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